Sally Pipes: Obamacare's not-so-universal coverage

Federal regulators just issued rules governing the individual coverage mandate within President Obama's Affordable Care Act, which, starting in 2014, will require all Americans to secure health insurance or pay a penalty of $95 or 1 percent of their income, whichever is greater.

But the mandate is turning out to be little more than a suggestion. Some 24 million people are expected to be exempt in 2016, according to the Congressional Budget Office. Another 6 million not lucky enough to qualify for exemptions will likely go without coverage – and pay an estimated $45 billion in fines for doing so.

With the feds now acknowledging that nearly 10 percent of Americans will remain uninsured even after they're required to buy insurance, it's clear that the individual mandate will fail to deliver the universal coverage its backers promised.

According to the proposed rules, illegal immigrants, American Indians, parishioners at some churches, and incarcerated people all have permission to flout the law's insurance requirement.

The regulations also exempt everyone who is technically eligible for Medicaid – the joint federal-state health insurance program for the poor – but lives in a state that has opted out of Obamacare's expansion of Medicaid.

Historically, states have set their own Medicaid eligibility rules.

Obamacare asks all states to open the program to anyone making less than 138 percent of the Federal Poverty Level (FPL).

Originally, the feds planned to require states to expand Medicaid; that was how half the 32 million people expected to gain coverage under Obamacare were to do so.

But last summer's U.S. Supreme Court ruling on Obamacare allowed states to opt out of the Medicaid expansion. Because of the decision, the CBO estimates that only 12 million people will be added to the Medicaid rolls.

At least 15 states have indicated they're not likely to expand Medicaid. Another 11 are undecided.

Medicaid already represents the largest portion of total state expenditures.

Expanding the program could cost a populous state like Florida as much as $20 billion over the next decade. Other states face possible multibillion-dollar Medicaid tabs as well – even as they collectively face $55 billion in budget gaps in this fiscal year.

So states are wary of expanding Medicaid because they can't afford it. But as a result, millions of low-income Americans will be exempted from the mandate – and remain uninsured.

Even with all those exemptions, total Medicaid spending is projected to jump $644 billion over 10 years.

Nearly half a million children have also been exempted from the mandate.

Under the law, employers must provide workers coverage that costs less than 9.5 percent of their wages. If they don't, they face a fine – and their workers can shop for coverage in state-run insurance exchanges. Individuals with incomes up to four times the federal poverty level – about $44,000 in 2012 – may be eligible for federal subsidies.

For families, the rules are more complicated.

Say a father's employer offers him single coverage that costs less than 9.5 percent of his household's income – but a corresponding policy for his family exceeds that figure. In this case, the family is out of luck. It can pay for the seemingly unaffordable family coverage through the employer, or the kids can flout the mandate without penalty. Subsidized coverage through the exchanges is not an option.

According to the Government Accountability Office, this rule will leave about 460,000 kids without access to employer-sponsored coverage.

Middle-class families would be hit particularly hard.

Imagine a single-parent family of three earning just over 250 percent of FPL – about $48,000 a year. The parent might get insurance through work. But the two children won't be eligible for subsidies through the insurance exchanges – or for coverage through the State Children's Health Insurance Program, which covers kids in most states with family incomes up to 2.5 times the poverty level.

Meanwhile, similar families with incomes as high as 400 percent of FPL – more than $76,000 a year – will be eligible for subsidies through the exchanges if they don't get coverage through an employer.

It's hard to see how a legal requirement that exempts 24 million people is anything but a failure. But that's exactly what's happening with the individual mandate.

Here's an idea. How about an exemption for everyone – not just from the mandate, but from the entirety of Obamacare?

Sally C. Pipes is president, CEO, and Taube Fellow in Health Care Studies at the Pacific Research Institute. Her latest book is "The Pipes Plan: The Top Ten Ways to Dismantle and Replace Obamacare" (Regnery, 2012).